Tug of War 08-28-14

The U.S. economy today at last showed itself solidly on the mend when the U.S. Dept. of Commerce announced a second quarter rise in gross domestic product (GDP) at 4.2 percent annualized (better than economists had predicted), a good recovery after a first quarter of shrinkage. Business investment also gained the most in more than two years.

The increases might lead some to believe the Federal Reserve Board will slow or halt its dovish monetary policies after it winds down the current quantitative easing program in October. Read more about Tug of War 08-28-14

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August 2014

A Fresh Start

In this issue we review a couple of recommendations facing near-term headwinds but still remain strong long-term bets. We also discuss corporate actions initiated by our recommendations. One of our utilities has sold some of its assets, which now trades separately as a yieldco. Moreover, one of our recommended pharmaceutical companies made a big splash and acquired a small biotech to foray into a lucrative market.

We also examine what current interest rate trends is saying about the economy and whether another recession may be in our future, how to play in the current low market volatility, and much more. Read on... Read more about A Fresh Start

Still the Fed Story 08-21-14

That the U.S. Fed, not in a small part, is responsible for the ongoing market rally, isn’t an argument many would willingly debate. After all, as the old adage goes, the Fed writes the market letter. Indeed, the market’s attention to the smallest detail of U.S. monetary policy has been obvious in trading over the last few years.

Yesterday, as the minutes of the latest Federal Open Market Committee (FOMC) meeting were released, the market dipped for a while as investors digested and processed the message of the Fed. Essentially, though, the results can be seen in the market’s quick recovery as it closed the day in positive territory. Today, the rally continued and the S&P 500 closed at another record high. Read more about Still the Fed Story 08-21-14

Confidence Restored 08-14-14

U.S. consumers recovered some of their confidence, based on improving views of household finances and economic gains, according to the Bloomberg Consumer Confidence Index. This measure rose to 36.8 for the week ended August 10, up from 36.2 a week earlier when it came in at the lowest point since June 8. This is good news as better consumer sentiment generally indicates improved spending trends, and, after all, consumers support more than two thirds of the U.S. economy. Read more about Confidence Restored 08-14-14

Where's the Beef?

Last week, earlier this week and even today, stocks came under some pressure. Since last Wednesday, when the Federal Open Market Committee (FOMC) reduced the size of quantitative easing by another $10 billion, the market has declined roughly 4 percent, including the worst one-week performance since 2012 last week. The blue-chip index now sits at a two-month low.

The Fed will keep to its taper schedule, apparently, and eliminate the remaining $25 billion in monthly debt purchases with its next two FOMC meetings, completing the process in late October. That does not mean the Fed will reverse its easy money policies with the asset purchases. Far from it: the central bank looks very keen to continue to generate liquidity, albeit via an alternative route, reinvesting significant portions of maturing principal and only ever-so-slowly reducing the Fed balance sheet. Read more about Where's the Beef?